Bought Some QCOR

Picked up some Quescor Pharmaceuticals today. They had a lot of excitement last year pending the developement of a new drug. The made a mistake in the paperwork they filed so the FDA returned it. The stock consequently got hammered before leveling off. When QCOR refiled their application it was largely ignored. Their new drug application is solid I think. We could see some great upside activity in the coming months.
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Does Anyone Else Feel Like They Have Just Been Taken

Mr. Wagoner, CEO of GM was fired over the weekend. He was not fired by the company board, nor the shareholders. He was fired by the government, more specifically Barrack Obama. Barrack Obama is a politician! He has never run a company in his life and he fired the CEO of a private institution. So much for all the "anti nationalization" rhetoric. Wake up Americans, bank CEOs are next. We are now officially a socialist nation. Taxation without representation, corruption, power conolidation, nationalization...is anyone else's blood boiling?
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Pending Volatility

It's going to get pretty dicey today and next week. This next week will decide whether we do a 50 percent retracement or a 5 percent retracement. The bulls and bears will be battling it out. I am hedged or cash to protect my profits.
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We Aren't Too Far Behind

Herd Mentality And The Market

The top reasons people are saying we have hit bottom:

1. Stocks are grossly undervalued
2. Housing is showing signs of improvement
3. Commodities are rallying
4. Massive government stimulis
5. Dovish commentary from Fed

This rally is going to be a very fun wild ride to the upside. People are euphoric! Just a few short weeks ago most market sentiment was sidingly bearish. Now, with a sudden 22 percent rally, market sentiment is decidedly bullish. When this thing starts to fizzle though in the next 3-6 months, watch out. The bear market rally in the midst of the great depression went for a good 50 percent. The market we live in today is full of black box electronic trading strategies, swing traders, and hedge funds. This market rally will way over react to the upside. It is a great time to buy, but watch out once we top out. Allow me to debunct the bull market pundits.

1. Stocks are undervalued...These companies are not undervalued just because you can buy a slushy for the same price as a citi group stock. Current earnings per share put the SPX at 600 or 650, not it's current 812 mark. Forward earnings aren't looking too hot either. Financial institutions are estimated to reduce earnings estimates by as much as 60 percent aggregated over the next few quarters alone.

2. Housing is showing signs of improvement...Housing prices gapped down in price and therefore enticed investors to buy in. The forclosures are still rising and unemployment is still rising steadily, the extra housing supply will keep coming. We are still in a housing bubble as the average salary can't afford a home for another 30 percent price decline. Sure, you can lower interest rates to 3 percent to make houses more affordable, but then we are recreating another bubble.

3. Commodities are rallying...Commodities are rallying because of inflation. We buy oil with the U.S. Dollar. When we spend ridiculous amounts of money to "spendulate" the economy into submission, we create an inflationary environment. Oil supplies remain relatively consistent with demand. Oil therefore isn't rallying based on fundamental economic numbers...just the weakness in the dollar.

4. Massive government stimulis...I have to admit, trillions and trillions and trillions and trillions of dollars created out of thin air and given away doesn't escape notice or market inflection. In my view however, this is just another bubble we are creating that will eventually pop. The generation that lived through the depression had to learn to scrape and save and repair their shoes. We just borrow more money. This free money is not free. We will eventually have to pay the piper and face the reality that huge amounts of debt is never going to substitute for a decent savings account. Plus, it took Uncle Sam over a year and a half to throw the money that is supposed to turn the economy on it's heels. Tough to stop a rolling semi truck once it gets going.

5. Dovish Commentary From Fed...Weren't they long the market end of 07 and 08?

Going up? Which Floor?

We are most likely in a bullish trend for a quarter or two. After borrowing trillions and trillions of dollars, and flooding the market with unprecedented amounts of money, the markets are predicting some form of stabilization. This rally has a lot of room to run, we might go as high as 50-60 percent rally. We already have 22 percent in two weeks. We are for the short term overbought so I would wait for a decent retracement first before buying in.
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Light Volume So Far

As traders digested Geithner's plan today, the markets rallied over 300 points! Volume is pretty light so far. I wouldn't be suprised to see a sell off into the close or tomorrow but there was definately some great long positions to take early this morning. This is that retest of the highs I blogged about last week. If we do start to get a sell off then I really like buying shares of FAZ.
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Okay, Now That That's Over

We will be looking for one of 3 things. We had a really really powerfull rally. I have said in previous posts that I expected the market to find a really nice 3-6 month rally in the eye of the storm. Although I didn't expect this to come until Q2 or Q3, it could be upon us already, and it would be dumb not to be open minded to it. Next week we will be looking for the market to have a major reversal day on great volume. This could happen either at our previous lows or by setting a higher low from the one previous. If the market makes a really week bounce off of the previous lows over the next week or two, then there is nothing to this rally. Our if we can't make new highs better than last week then forget it. Be ready though to buy some stocks if this thing is for real though, depression rallies have gone for as much as 50 percent or more.

Also, I think that real estate is an absolutely fantastic investment right now. It is a great play against the 800 pound inflation gorrilla sitting in Obama and Bernanke's offices right now.
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Inflation Is Now Aflame

Beyond their already oversized balance sheet, the fed anounced another 1.15 trillion dollars in spending. The markets were at major resistance levels and the fed knew they had to make a bold statement to drive the markets above these levels. They certainly took bold action today. Actually, they took such bold action that many are asking if they are crazy. If their plan works...great. One thing is for sure though, if it doesn't this country will be going to hell in a hand basket. If I was running a business, I would never ever take those kinds of risks. Now we are taking major risks with the United States of America. The U.S. Dollar got hammered today, gold was up in a big way, and oil even ended up on the day. This government isn't playing with fire, it is playing with a nuclear bomb. But hopefully they can stave off a recession...btw, the market was up 90 points today. YAY! 90 points for 1.15 trillion dollars in printed money!
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AIG and Hypocricy

Treasury Secretary Geithner told congressional leaders that "the U.S. Would recoup executive pay by deducting the amount from the next 30 billion dollar installment". What!? Does that make sense to anyone? This company should be allowed to fail. I would take a 2000 point drop in the market any day rather than pay 30 billion a quarter to keep AIG alive for the rest of it's life. Can you say corruption? Yes, the executives do not deserve the bonuses. However, if you signed a contract with your company, and it was still in business and you had fullfilled your obligations...would you expect fullfillment of your contract? Instead of spending all this smoke screen time taxing their bonuses without representation and saying that this is an outrage...why aren't we pissed that we have given a company over 170 billion dollars that is dead 5 times over. GM is a black hole, AIG is a black hole, Citigroup is a black hole. If we don't let things fail we will just create another huge bubble. The next bubble will be worse than the tech or real estate bubble...way worse. It's the old fashioned phrase "you get what you pay for"
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Flat

Markets will most likely be trading flat today, saving their energy for the fed policy announcement tomorrow at about 2:00 est. I wouldn't be suprised though to see some continued profit taking and see the markets close a little down today. Tomorrow should trade a little up in early morning trading before choosing a direction.
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The Mountains

I love the mountains, I love the rolling hills, I love the praries, I love the dafadills...well...anyway...In the past week the market has certainly climbed a very very high mountain. The rally we experienced was very powerfull. We rallied near 1000 points on the Dow before topping off today. Can you believe in this financial crisis tha JP Morgan Chase for a short time today traded at 30 times earnings! This when most bank stocks are trading in the low teens if not single digit P.E.s. FAZ, a 3X bearish financial etf is looking very very tempting right now. It traded more volume than ever before today and closed with a bullish japanese candle (hammer). Still, a trend this powerfull doesn't just turn on its heels and run without the greed seekers at home watching cnbc buying into the last eeks of the rally. That, plus the fed meeting coming up on wednesday could push this market to retest it's highs tuesday or wednesday before plummeting again. Keep you posted on the FAZ trade.
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Stress

Markets will probably end the day just a little to the upside. Monday the govenment stress tests will be done on all the major banks to see if they would make it through "worst case" scenarios. I think the markets will initially rally at the results of the stress tests. Once the details are hashed out, and everyone remembers that economic conditions remain pragmatic. By wednesday of next week we will know if we are in a 1-3 month bear market rally or a dead cat bounce. My personal feeling is that late next week we will be well on our way to testing the previous lows set on the DOW. Markets don't just go crazy bullish without retesting their lows in times like these.
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Tradable Rally?

Retail sales figures were much better than expected. GE debt did not get downgraded nearly as much. Pfizer came out with a really sweet cancer drug. Will we have a sustainable bear market rally? Personally, I think we are going to need to see more good news to continue this rally. Although there are some signs of things bottoming out, I am going to wait and see if this isn't just the eye of the storm. The next week to week and a half will tell a lot.
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Been Nice Knowing Ya Dollar

The U.S. Dollar has been showing some major weakness as of late. If you want to buy TIPS, today would be a great day to buy in.
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Trade Alerts

Buyers are scared out of their minds, costs to insure corporate debt skyrocketed tuesday even as the market rallied 380 points. LQD has continued to sell off, pricing in more credit risk. I am short ABT and XOM for a quick swing trade. We will at least test the previous low within the next few weeks.
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Market Bottom

Yesterday enbattled and beleagured Citigroup came out and said that they were profitable profitable for the first few months of 2009. That is excellent, and here I was thinking they were dead 3 times over on their balance sheet. However, I guess if you get bailed out and get billions and billions of dollars in bailouts you would think that money could turn a profit at some point or another. I am not convinced we have hit a market bottom. We are at least going to test the previous lows. At the same time if this does turn out to be a powerful rally then I will be perfectly fine with changing my bias toward the market and participate in some bullish trades.

On another note we are seeing that pullback in oil I mentioned in previos posts. I will be ready to buy into USO or ERX with about 1/5th of my portfolio soon. Chances are that oil has hit bottom and will trade flat to up until the market turns around. Then prepare yourself for big gains in oil. The pending inflation and the increasing demand in developing countries will send oil screaming to higher levels than 2007 even saw.
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No Buy Plays

I have been searching all day for a decent long position for an expected relief rally. I sold my BGU holding this morning when the market broke it's uptrend. I have not seen one bullish play I am confident in, nor do I think there will be one until a possible capitulation. The corporate bond indexes are down 2.5 percent plus today. There is a lot of risk now being priced into fixed income that has not yet been priced into equities. Be very very carefull taking on any new long positions.
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Follow Up

You may recall a few posts ago when I said that GE might carry the markets on its back into the close. It looks like I was right, only a day late. The last 30 min of trading today was very very bullish. The markets were starting to get very oversold. Pretty easy to do when you have 4 straight down weeks. GE rallied 6 percent in the last hour and dragged the rest of the market up with it. I think the first part of next week we could see some good days trading to the upside. I picked up some BGU at the close (leveraged Drexion Large Cap Bull ETF) to hedge against short positions I have (and am still confident owning) in Visa and now Walmart. Oil is starting to show some real strength. I may buy in on the next dip and start selling covered calls on it.

On a side note I am thinking about making some T-Shirts that say "Obama, A Short Seller's Dream Come True". What does everybody think?
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Yellow Smiling Face and Falling Prices

Time for Walmart to start showing the falling price commercials for their stock. Too many people think it is immune to the recession. It's getting some pretty decent selling pressure on it. I picked up some puts on it today.
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GE and The TRIN

I don't know if you have ever heard of the TRIN before? A man named Richard Arms developed it many years ago. It is basically an indicator that publishes the ratio between up volume buying and down volume selling. A ratio above 1 is typically bearish, while a ratio below 1 is bullish. Today, when the market is down 200+ points the "TRIN" ratio is .63. This may be due to the GE activity going on today. The GE CFO was on TV this morning going over the specifics of their balance sheet. There is a whole lot of volume either covering short positions or buying long value today on GE. My theory is that this"up" GE volume is influencing the TRIN to the bullish side of the ratio. It is possible we could see this market rally a tiny bit off it's lows into the close on the back of GE...so watch GE stock today as I think the market tries to go where it goes.
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Oil

If I was a gold digger, I would marry oil. I am very very long oil. More specifically, I am waiting for just the right moment to buy a substantial percentage of my accounts into United States Fund (USO). I like a commodity play better than an oil company. I expect oil companies to be blamed, taxed and punished by the government many times over as oil prices rise. Although I am bullish long term on oil, my goal is to be surgical in my entry. I can see an entry point possibly coming to surface at some in the near future. Today...is not that day...I could be wrong. There are still many resistance levels above oil however, and we are still in a so called "deflationary" environment as the stock market continues to sell off.
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Prediction

GE is leveraged 140 times liquid capital. Dow Chemical has just about every single business unit for sale so that they can aquire Rohm and Haas company. I don't see either company's chances of raising money from a business unit sale very good in these markets. I could see either company getting a bailout at some point in the near future. Gosh I am so negative. I do see some hints of positive buy signals from Bank of America again, though. Nothing sure, but something to keep an eye on.
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Get Used to This People

Last week the feds gave 25 billion dollars to Citibank. They also began negotiations for 18 billion dollars to the league of companies that manufacture parts for the car companies. The latest? 30 billion dollars for AIG. My prediction...amidst all these bailouts there is not yet one that fixes the problem. Until that happens, have fun keeping track of all the bailouts that have occured, because they will continue to be diluted by many more bailouts.
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